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DEPARTMENT OF TREASURY Financial Management Division TELEPHONE: FACSIMILE: EMAIL: WEBSITE: (675) 312 8741 (675) 312 8808 [email protected] WWW.TREASURY.GOV.PG VULUPINDI HAUS, Level 2 P.O BOX 542, WAIGANI PAPUA NEW GUINEA 2013 Annual Issuance Plan for Inscribed Stock and Treasury Bills of the Independent State of Papua New Guinea Monday 7th January 2013 The Government of the Independent State of Papua New Guinea announced on November 13 2012 its 2013 National Budget. The Medium Term Debt Strategy 2013-2017 (the Debt Strategy) was updated, and the three existing strategies were reaffirmed: 1. Maintain Government Debt at sustainable levels. Government Debt as a proportion of GDP is projected to increase from 26.1% by end 2012 to 32.0% at the end of 2013. The Fiscal Responsibility Act 2006 (as amended) increased the prohibited level of General Government debt from 30.0 per cent to 32.0 per cent. The level was increased due to the Government’s development agenda. Certain other elements of the Debt Strategy may need to be temporarily exceeded in order to achieve the financing amount required. PNG has set itself a target of BBB rating. A BBB rating means the Rating Agencies consider PNG as having adequate ability to meet its financial obligations. PNG’s current sovereign credit rating is B plus with a Stable outlook from Standard and Poor (S&P). 2. Reducing the excessive financial risks in the debt portfolio by: Maintaining foreign currency debt at around 40% of the total Central Government debt portfolio by restricting the amount of new foreign currency loans it enters into. Reducing the amount of short-term, variable rate debt (Treasury Bills) from the current level of about 43% of domestic debt to 39% by 2013. 3. Gradually making improvements to the domestic debt market Treasury will set up a Domestic Bond Market Development Committee to oversee the continued development of PNG’s bond market. Treasury will also start work on the necessary prerequisites to establishing a formal Government secondary market. Summary of 2013 Debt Issuance Plan Set out below is an outline of the debt issuance plan for 2013. Further details on the strategy and issuance plan are shown in Chapter 12 and Appendix 3 (Table(s) 9, 10 and 12) of Volume 1 of the 2013 National Budget Papers. This information is available on the website: http://www.treasury.gov.pg/html/national_budget/national_budget.html Summary of Repayments and New Issuance during 2013 In Millions of Kina Balance 31/12/12 Repayment 2013 New Issuance 2013 Projected Balance 31/12/13 Treasury Bills 2,536.9 3,216.3 3,511.5 2,832.1 295.2 Inscribed Stock Other Domestic Debt 3,367.0 138.3 816.0 4,044.7 677.7 - - 1,405.0 1.405.0 1,405.0 FX Debt 2,610.5 168.8 644.7 3,086.4 475.9 Total Government Debt 8,514.4 GDP Debt as % of GDP 3,523.4 6,377.2 11,368.2 32,666.1 35,571.4 26.1 32.0 Net Change 2013 2,853.8 Treasury Bills Treasury Bills will continue to be auctioned on Wednesdays, and settled three days later on the Friday. Department of Treasury determines the amount of Treasury Bills required to ensure there are sufficient cash balances in the Government’s bank account so as to pay the Government’s expenses that are due. Bank of Papua New Guinea in its role as the debt management issuing agent of the Department of Treasury will announce to investors by close of business on Tuesdays the amount and type of Treasury Bills to be sold. The Government will continue to issue mainly 6 month and 12 month Treasury Bills. Inscribed Stock Inscribed Stock will be auctioned on the third Tuesday of each month and settled three days later on the Friday. The Government will offer K80 million per month from January to August, K45.5 million in September and K43.5 million from October through to December 2013. Bank of Papua New Guinea, in its role as the debt management issuing agent of the Department of Treasury, will announce to investors during the first week of each month the amount of each Inscribed Stock series to be auctioned (each series has a specific maturity and coupon). Refer to the issuance calendar below for more information. 2013 Issuance Calendar – Inscribed Stock Issue Date Amount on Offer Tue, January 15, 2013 K80.0 million Tue, February 19, 2013 K80.0 million Tue, March 19, 2013 K80.0 million Tue, April 16, 2013 K80.0 million Tue, May 21, 2013 K80.0 million Tue, June 18, 2013 K80.0 million Tue, July 16, 2013 K80.0 million Tue, August 20, 2013 K80.0 million Tue, September 17, 2013 K45.5 million Tue, October 15, 2013 K43.5 million Tue, November 19, 2013 K43.5 million Tue, December 17, 2013 K43.5 million Total Issuance K816.0 million Maturities & Coupon Rates To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month To be announced at the beginning of each month Other domestic loans The 2013 National Budget is a deficit budget, with a large financing task required. Depending entirely on traditional methods of financing that is Treasury Bills and Inscribed Stock, might not successfully achieve the funding requirements hence new methods of issuance or products are required. Consequently the borrowing of K1, 405.0 million will comprise not only of domestic debt, but may comprise external debt as well. One option is a possible US Dollar denominated bond issuance. Updates of the debt issuance plan The above issuance plan is based on projections in the 2013 Budget, and if there are any changes they will be made as part of a Supplementary Budget in 2013. Also note that the above issuance plan amount on offer is subject to change for each month and investors will be notified accordingly if changes are made on amount offered per month. By the beginning of each quarter Treasury will announce: The likely amount of Treasury Bills that mature over the next three months and the likely amount of Treasury Bills to be auctioned The series (maturity and coupon) of Inscribed Stock to be auctioned over the next three months Additional information Further information on the historical results of auctions is available on the Public Debt folder of the Department of Treasury’s website: www.treasury.gov.pg. If you have any questions please contact the Securities Execution Branch on telephone numbers: 312 8715, 343 5222 or 343 7190. Major Activities for first six months of 2013 By the beginning of February 2013 Treasury will seek formal feedback from major investors and provide them with a summary of the Government’s debt management activities for 2013. Treasury will develop and distribute to investors a summary of the feedback received, and the major activities that Treasury and BPNG will undertake in the second half of 2013. Treasury will set up the Domestic Bond Market Development Committee JOHN A. UWARE First Assistant Secretary